GERMANY: The proposed acquisition of Vossloh Locomotives GmbH by CRRC Zhuzhou Locomotives Co was cleared by the national competition authority on April 27.
Bundeskartellamt President Andreas Mundt said the authority had examined ‘very thoroughly all the particularities associated with the acquisition of a European company by a Chinese state-owned company’, following the announcement of the deal in August 2019.
By acquiring Vossloh, CRRC would be taking over a key European manufacturer of shunting locomotives. Among the issues to be considered in the competitive assessment were possible state subsidies, the availability of technical and financial means and strategic advantages from other shareholdings, he explained.
‘We also looked into the threat of low-price and dumping strategies and the cost advantages resulting from CRRC’s state-subsidised activities in many other markets. CRRC plays an important role in China’s industrial strategies. Furthermore, in complex vehicle approval procedures CRRC can benefit from Vossloh’s expertise as an established manufacturer in the future. However, our concerns were not reason enough to justify prohibiting the merger.’
Currently a subsidiary of Vossoh AG, Kiel-based Vossloh Locomotives employs about 500 people and reported a turnover of more than €100m in 2019. The company is currently the market leader for the manufacture of diesel-engined shunting locomotives in the European Economic Area. CRRC Zhuzhou is a subsidiary of China Railway Rolling Stock Corp, the world’s largest rolling stock manufacturer, with more than 150 000 employees and a group turnover of €27·5bn in 2018.
The Bundeskartellamt said it had been ‘difficult to assess the participation of Chinese state-owned companies in the context of merger control’. A survey had found that European competitors expected the merger to distort competition, noting that CRRC had access to ‘vast technological resources’.
Pointing out that Vossloh Locomotives’ competitiveness had ‘suffered considerably over the last few years’, the agency noted that established manufacturers like Alstom, Stadler, and Toshiba had entered the European market with innovative traction technologies since Vossloh AG decided to put its subsidiary up for sale in 2014. The market was ‘changing towards hybrid traction systems and dual mode locomotives’ which the company ‘currently does not offer’. And while CRRC had supplied some shunters to Deutsche Bahn in Hamburg and Berlin and to Rail Cargo Hungaria, its success in Europe ‘has been limited so far’.
‘Based on our investigations, we were able to exclude a considerable impairment of competition on the European shunter market as a result of the merger’, said Mundt. ‘Although the Chinese state strongly protects CRRC, which plays a key role in two of its strategic plans —Made in China 2025 and the Belt and Road Initiative — this case shows that while Chinese state-owned companies enter markets with substantial economic power, this does not necessarily pose a threat to effective competition.’